The Triad, Society and Market Rules

 Amul cartoon ad on corruption

The other day, I was part of an adda session where those present were lambasting our political leadership for the mess that is India. Others blamed the `steel frame’ or the babus who run the system and yet others, business leaders who helped corrupt the two.

Of course, the very idea that we are in a mess is not new. Even when India was on top of the world with 9 per cent GDP growth , we were simultaneously in a mess. High levels of corruption, poor infrastructure, social and political unrest in some parts of the country, huge urban-rural income divides remained side by side with `Shining India’. The only difference is that now things look worse – as coupled with all the ills of a typical developing economy, we now have a slowdown in our boom-time story, with its attendant sene of despondency.

This makes the search for the culprit even more interesting. If one can really pin-point him or her, curing India may be that much easier?

At all times there will be dishonest politicians, business leaders and bureaucrats as well as honest ones. This is a triad which has ruled all countries since time immemorial. There are just two more social pillars which count in forming or reforming national societies – the regulatory judiciary which assures rules of the game are followed and the press, which acts as a conscience keeper.

The main differences between a `good period' and a `bad period' for any society lies in - i) the degree to which the triad has been corrupted and ii) the degree to which this system's regulators -  judges/judicial magistrates/ quasi-judicial officers including economic regulators have emained free and fair.

I am told JRD Tata had in the 1950s and 1960s spurned offers by his lieutenant and others to use bribes and favour exchanges as a way of getting around the `License Raj' which was stifling his empire's growth. In this, he was unlike most of the other big business houses of this country. Tatas remained one of two big houses in the country, till the Ambanis came along. Corrupt politicianss or bureaucrats were not unknown in those decades, but their numbers were perhaps within tolerable limits. The judiciary, despite being political appointees, were similarly, more or less fair and honest.

One prime reason for all this was that Indian society as a whole looked down on corruption, conspicuous consumption and flashy lifestyles.

Society started changing its stance towards corruption in the 1980s, becoming more willing to accept and compromise. The old rules of the `License Raj' were seen as outstanding examples of how to corrupt the system and people who `actually got around them' and build enterprises were lionised. It was no longer fashionable to be poor. Rather the reverse - showing off wealth - was a must do. In Delhi University, students from certain states, openly talked of the dowry one could expect if one cleared the civil services or managed to bag a seat in prestigious management schools. One interesting but tell-tale fact in the dowry ranking was that a railway clerk earned a higher dowry than many officers! Obviously, by then Indian society had started accepting that some of its members could be dishonest !!

Paradoxically, the revelations of kickbacks in the Bofors scam (which now seem like chicken-feed) and subsequent scams seems to have encouraged greater corruption levels down the line. The idea being if the high and mighty can feed off the system, why not the rest.

By the 1990s, when we started dismantling the old, much reviled `License Raj', Indian society was more than willing to embrace the market. Socially, a man or a woman was appraised, not on the basis of his learning or his qualities of head and heart, but rather on his spending power and/or the influence he could peddle.

One example was that politicians and bureaucrats who did not really need a red or blue beacon on their cars, started hankering for it (I have still not understood what society gains from giving anyone other than ambulances and patrol cars those prized lights, and it has always remained a big question why a minister needs a beacon, when his police escort car has one and clears the way for him in any case).

Bringing in `The Market' also meant bringing in transparent rules and regulations which the West had developed over centuries and which we had forgotten through the `pseudo-Socialist era'. However, we were reluctant to embrace those rules as were the western businesses who flocked to Indian shores. They `compromised' `opportunities'!

We are still to bring those rules in, in full measure. Attempts like the amendments to Companies Act which could bring fairplay into the running of our firms, have been deliberately diluted. Many of the economic regulators who have been set up, either did not have the legislative teeth to go about their business or had the misfortune to be at times led by officers who were unable or unwilling to root out wrongdoing in the marketplace.

I cannot comment on whether some of them were compromised or not. But suspicions do linger in some cases, which means the rules which governed these regulators were less than transparent and allowed greater than usual discretionary powers of commission and more importantly ommission.

Questions also come to the mind on the system by which regulators were selected. Perhaps, we should look very seriously at the leader of the opposition, Mr L.K.Advani's, suggestions on a collegium which could select the Chief Election Commissioner. This collegiums could perhaps also be given the chance to select the principal economic regulators, given the fact that their rulings affect the lives of millions of ordinary Indians! (A ruling by the airport regulator could well make aircraft tickets costlier or cheaper e.g the recent ruling on differential development fees charged from passengers flying out of Delhi.)

The point that one may make is that the regulatory environment is far from perfect and this compounds the turmoil being witnessed in India where new economic rules and systems are replacing the old. Under such circumstances not only the marketplace but also society at large remains in turmoil.

The good thing about the 2000s is that Indian society seems to have got fed up with this environment of total laissez faire, with its attendant chaos. Good, for one thing, this less than perfect system is hardest on the poorest and the weakest, on whom it preys the most.

Remember, in every scam someone is becoming rich at the expense of someone else and that someone else is the weakest and poorest member of our society.

When Special Economic Zones and mining leases are given away to business tycoons at a fraction of the cost which they should command, the compensation package for the farmers and tribals ousted is that much lower.

Similarly, in a more convulated way, when steel barons are allowed by politicians/bureaucrats/ top bankers to get away from their interest payback commitments despite having siphoned away millions by overstating capital expenditure, it is the poorest bank deposit holder who loses out the most. His fixed deposit fetches less as the bank faces higher NPAs and reduces borrowing costs. He also faces the double whammy of inflationary pressures as the money written away remains circulating within the economy, raising prices.

Society, without thinking all this through, has instinctively shown its preference for transparent rules of the game, along with market capitalism. Without being told so, society has understood that this is the best way to check corruption and inefficiency. The Anna movement is in itself may not be much to be spoken of, given its many downsides. However, it brings to the fore people's expectations of better and more transparent regulations, which in turn checks what ails India.

What I would have liked to say at that adda, which I referred to in the beginning, but did not manage to say, is : Let's stop criticising one or the other member of the triad, listen to the common man in the street and take this opportunity to try kick in responsible rules which could actually improve the system.